Need to raise finance for your family business? Here are our six top tips:
- The ability of a business to raise finance, in the majority of cases, depends on the assets available to a lender against which it can secure its lending. Consider freehold or leasehold property, debtor book or inventory and whether such assets are already charged to any prior funder. This will determine the type of lending available (property finance, asset finance or invoice finance). If the business owns its own property, consider if a sale and leaseback provide sufficient funding for future growth.
- Lenders back good people. The credibility of the management team is crucial. Does the business have a good story to tell? Where has the business come from and where is it going? A business that can demonstrate a good track record of growth and has the ambition and commitment – based on a strong business plan with milestones and KPIs – to develop and grow to the next level is more likely to be attractive to and secure funding from investors/lenders.
- If considering any of the current Covid-19 government backed lending schemes, you need to act fast. The deadline for applications to CBILS, CLBILS, the Bounce Back Loan Scheme and the Future Fund has been extended to 30 November 2020. Schemes such as CBILS will include a 12 month interest and fee free period.
- Whilst your existing bank is an obvious first port of call, also consider other sources of funding such as additional equity investment, issue of loan notes or bonds, high net worth investors, crowd funding, alternative lenders and grant funding.
- Lenders will pay close attention to a business’ financial health and therefore the quality of information you provide to them is key. Consider whether a new Finance Director appointment is required to drive through any expansion programme. If the business cannot support a full time FD role, consider engaging the support of a specialist finance professional who can work with you to make your business attractive to investors/funders to ensure that any funding application is successful first time around.
- Be clear on your funding requirement including how long it is needed for, as this will impact the type of funding and security required.